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Medical debts can impact credit reports for years

For people in New Jersey and around the country, one big source of stress is medical debt. Depending on the circumstances, a large amount of medical debt can add up in a brief amount of time. It may take years for a person to pay off the debts incurred from medical expenses.

Unfortunately for some people, even when the debt is paid off, it continues to bedevil their financial picture. As an illustration, one Ohio woman found herself with a large bill when she underwent a sleep study that her insurance company said it would pay for but ultimately didn’t. The woman ultimately paid off the $6,200 debt over several years.

However, the bill was classified as delinquent and it was referred to a debt collector, who in turn passed the information along to credit bureaus. Thus the transgression is on the woman’s credit report at least until next year and she can’t qualify for a credit card with a decent interest rate.

There is pending legislation in Congress that would remove paid-off medical debt from credit reports. The bill is in committee hearings and its fate is still up in the air. Some of the obstacles to getting this bill passed are the credit bureaus themselves. The bureaus argue that unpaid bills — even ones that have been resolved — paint an accurate picture of how worthy someone is in terms of credit.

However, legislative sponsors point out that medical bills that are paid on time do not benefit people on their credit reports because on-time payments aren’t reported by hospitals or HMOs. They say it isn’t fair to penalize consumers for doing something wrong if they aren’t rewarded when they do something right.

Source: The Columbus Dispatch, “Incurable financial wounds plague many,” Mike Wagner and Jill Riepenhoff, Oct. 9, 2012

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